Question 1

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was

Accepted Answer

A)   97.14.
B)   100.10.
C)   102.94.
D)   109.38.

Question 2

Table 24-4
The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.
 
-Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Accepted Answer

A)   80.8 in 2012, 100 in 2013, and 107.7 in 2014.
B)   80.5 in 2012, 100 in 2013, and 107.3 in 2014.
C)   247.5 in 2012, 307.5 in 2013, and 330 in 2014.
D)   210 in 2012, 260 in 2013, and 280 in 2014.

Question 3

Of Social Security benefits and federal income tax brackets, which is indexed?

Accepted Answer

A)   Both are indexed.
B)   Only Social Security benefits are indexed.
C)   Only federal income tax brackets are indexed.
D)   Neither is indexed.

Question 4

In 1983, one could buy a model radio-controlled airplane for $11.50 each. Those same planes are available today and the price increased at exactly the rate of inflation. If the CPI today is 220.5 and in 1983 was 105, what is the price of the airplane today?

Accepted Answer

A)   $24.15
B)   $11.50
C)   $5.48
D)   $2.10

Question 5

Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.
 
-Refer to Table 24-5. If the base year is 2006, then the CPI

Accepted Answer

A)   increased from 2004 to 2005 and increased from 2005 to 2006.
B)   increased from 2004 to 2005 and decreased from 2005 to 2006.
C)   decreased from 2004 to 2005 and increased from 2005 to 2006.
D)   decreased from 2004 to 2005 and decreased from 2005 to 2006.

Question 6

A COLA automatically raises the wage when

Accepted Answer

A)   GDP increases.
B)   taxes increase.
C)   the consumer price index increases.
D)   the producer price index increases.

Question 7

The CPI differs from the GDP deflator in that

Accepted Answer

A)   the CPI is an inflation index, while the GDP deflator is a price index.
B)   substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C)   increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the GDP deflator but not in the CPI.
D)   increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.

Question 8

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Accepted Answer

A) True 
 B)False

Question 9

An increase in the price of dairy products produced domestically will be reflected in

Accepted Answer

A)   both the GDP deflator and the consumer price index.
B)   neither the GDP deflator nor the consumer price index.
C)   the GDP deflator but not in the consumer price index.
D)   the consumer price index but not in the GDP deflator.

Question 10

Table 24-4
The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.
 
-Refer to Table 24-4. The cost of the basket

Accepted Answer

A)   increased from 2012 to 2013 and increased from 2013 to 2014.
B)   increased from 2012 to 2013 and decreased from 2013 to 2014.
C)   decreased from 2012 to 2013 and increased from 2013 to 2014.
D)   decreased from 2012 to 2013 and decreased from 2013 to 2014.

Question 11

The introduction of a new good

Accepted Answer

A)   increases the cost of maintaining the same level of economic well-being.
B)   decreases the cost of maintaining the same level of economic well-being.
C)   has no impact on the cost of maintaining the same level of economic well-being.
D)   may increase or decrease the cost of maintaining the same level of economic well-being, depending on how expensive the new good is.

Question 12

When the consumer price index falls, the typical family

Accepted Answer

A)   has to spend more dollars to maintain the same standard of living.
B)   can spend fewer dollars to maintain the same standard of living.
C)   finds that its standard of living is not affected.
D)   can save less because they do not need to offset the effects of rising prices.

Question 13

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Accepted Answer

A) True 
 B)False

Question 14

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Accepted Answer

A)   $17 more in his account, and his purchasing power has increased by $10.
B)   $30 more in his account, and his purchasing power has increased by $50.
C)   $40 more in his account, and his purchasing power has increased by $33.
D)   $50 more in his account, and his purchasing power has increased by $33.

Question 15

Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is

Accepted Answer

A)   $39,097.74.
B)   $43,062.50.
C)   $68,900.00.
D)   $108,062.50.

Question 16

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Accepted Answer

The real i...

Question 17

Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period.
 
-Refer to Table 24-14. Calculate the inflation rate for March.

Accepted Answer

The answer of Table 24-14
The table below lists the per...

Question 18

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Accepted Answer

A)   $39,333.33.
B)   $74,000.00.
C)   $89,333.33.
D)   $63,559.32.

Question 19

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Accepted Answer

A)   Sophia will have 3 percent more money, which will purchase 5 percent more goods.
B)   Sophia will have 3 percent more money, which will purchase 7 percent more goods.
C)   Sophia will have 5 percent more money, which will purchase 3 percent more goods.
D)   Sophia will have 5 percent more money, which will purchase 7 percent more goods.

Question 20

Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

Accepted Answer

The CPI in 1991 was ...

Exam 16: Measuring the Cost of Living

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Correct Answer
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Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is

Correct Answer
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When the consumer price index falls, the typical family

Correct Answer
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Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

Correct Answer
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The CPI in 1991 was ...
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Of Social Security benefits and federal income tax brackets, which is indexed?

Correct Answer
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The CPI differs from the GDP deflator in that

Correct Answer
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Correct Answer
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An increase in the price of dairy products produced domestically will be reflected in

Correct Answer
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Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Correct Answer
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Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Correct Answer
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Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was

Correct Answer
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Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Correct Answer
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Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Correct Answer
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In 1983, one could buy a model radio-controlled airplane for $11.50 each. Those same planes are available today and the price increased at exactly the rate of inflation. If the CPI today is 220.5 and in 1983 was 105, what is the price of the airplane today?

Correct Answer
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Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Correct Answer
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If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Correct Answer
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The real i...
View Answer

A COLA automatically raises the wage when

Correct Answer
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Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. The cost of the basket

Correct Answer
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Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2006, then the CPI

Correct Answer
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The introduction of a new good

Correct Answer
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Exam 16: Measuring the Cost of Living

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Correct AnswerverifiedShow Answer

Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is

Correct AnswerverifiedShow Answer

When the consumer price index falls, the typical family

Correct AnswerverifiedShow Answer

Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

Correct AnswerverifiedThe CPI in 1991 was ...View AnswerShow Answer

Of Social Security benefits and federal income tax brackets, which is indexed?

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the price of dairy products produced domestically will be reflected in

Correct AnswerverifiedShow Answer

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Correct AnswerverifiedShow Answer

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was

Correct AnswerverifiedShow Answer

Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Correct AnswerverifiedShow Answer

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Correct AnswerverifiedShow Answer

In 1983, one could buy a model radio-controlled airplane for $11.50 each. Those same planes are available today and the price increased at exactly the rate of inflation. If the CPI today is 220.5 and in 1983 was 105, what is the price of the airplane today?

Correct AnswerverifiedShow Answer

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Correct AnswerverifiedThe real i...View AnswerShow Answer

A COLA automatically raises the wage when

Correct AnswerverifiedShow Answer

Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. The cost of the basket

Correct AnswerverifiedShow Answer

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2006, then the CPI

Correct AnswerverifiedShow Answer

The introduction of a new good

Correct AnswerverifiedShow Answer

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The CPI in 1991 was ...
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The real i...
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